Trade Effects of Economic Sanctions on Russia

Sammanfattning

Economic sanctions have become a key instrument of geoeconomic policy, yet their effectiveness through trade channels remains contested. This paper examines the effects of sanctions on Russia's trade following the outbreak of the full-scale invasion of Ukraine. Combining structural gravity equations with a computable general equilibrium framework, I assess average, partner-specific and product-level sanction effects. The novelty of this study lies in examining the general-equilibrium trade effects of post-2022 sanctions on Russia using a uniquely granular dataset covering the near-complete universe of Russian trade flows together with disaggregated measures of sanctions, tariffs and non-tariff barriers. Reduced-form estimates show a sharp decline in bilateral trade due to sanctions, amounting to 72 percent across all sanctioning states and 46 percent for the EU. At the same time, I document large increases in trade with non-sanctioning countries driven by declining bilateral trade frictions. Counterfactual simulations show that sanctions significantly reduced EU exports to Russia (by a median of 17-21 percent) while boosting imports from third-party countries (by 10-16 percent), with only a minimal net effect on Russia's total imports. Price-based substitution induced by sanctions accounts for only around a quarter of the observed trade reorientation toward non-sanctioning countries. The evidence suggests that a significant part of the sanction effect is likely explained by non-price factors. Overall, these results underline both the limits of sanctions and the conditions necessary for their effectiveness as a coercive policy tool.